Correlation Between CAP SA and Inversiones Aguas
Can any of the company-specific risk be diversified away by investing in both CAP SA and Inversiones Aguas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CAP SA and Inversiones Aguas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAP SA and Inversiones Aguas Metropolitanas, you can compare the effects of market volatilities on CAP SA and Inversiones Aguas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CAP SA with a short position of Inversiones Aguas. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP SA and Inversiones Aguas.
Diversification Opportunities for CAP SA and Inversiones Aguas
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CAP and Inversiones is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CAP SA and Inversiones Aguas Metropolitan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inversiones Aguas and CAP SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CAP SA are associated (or correlated) with Inversiones Aguas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inversiones Aguas has no effect on the direction of CAP SA i.e., CAP SA and Inversiones Aguas go up and down completely randomly.
Pair Corralation between CAP SA and Inversiones Aguas
Assuming the 90 days trading horizon CAP SA is expected to under-perform the Inversiones Aguas. In addition to that, CAP SA is 1.92 times more volatile than Inversiones Aguas Metropolitanas. It trades about -0.17 of its total potential returns per unit of risk. Inversiones Aguas Metropolitanas is currently generating about 0.03 per unit of volatility. If you would invest 73,000 in Inversiones Aguas Metropolitanas on September 20, 2024 and sell it today you would earn a total of 313.00 from holding Inversiones Aguas Metropolitanas or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
CAP SA vs. Inversiones Aguas Metropolitan
Performance |
| Timeline |
| CAP SA |
| Inversiones Aguas |
CAP SA and Inversiones Aguas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAP SA and Inversiones Aguas
The main advantage of trading using opposite CAP SA and Inversiones Aguas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP SA position performs unexpectedly, Inversiones Aguas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Inversiones Aguas will offset losses from the drop in Inversiones Aguas' long position.The idea behind CAP SA and Inversiones Aguas Metropolitanas pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Inversiones Aguas vs. Aguas Andinas SA | Inversiones Aguas vs. Engie Energia Chile | Inversiones Aguas vs. Colbun | Inversiones Aguas vs. Enel Chile SA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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